European Fundamental Outlook, 01/07/13

Positive Economic Data Boosted the Euro

For Monday, expect the Euro to trade higher as optimism is seen in its overall economic data in which the Euro climbed 0.34% against the Greenback. With the upbeat economic data in the Euro-zone most particular in its service sector in which its purchasing managers index (PMI) posted a rise of 47.8 in December as compared to its 46.7 in its previous month, while its composite output index climbed to 47.2 in December, from its reading of 46.5 in November.Nonetheless, the consumer price index (CPI) remained unchanged at a seasonally adjusted annual rate of 2.2% in December, from 2.2% in the preceding month. Meanwhile, Germany’s purchasing managers index (PMI) for the services sector climbed to 52.0 in December which is slightly lower than 52.1 estimated earlier, and compared to 49.7 in November. In addition, retail sales also shown a rise of 1.2% on a seasonally-and –calendar adjusted basis in November, as compared to a 1.3% drop in the previous month.Furthermore, the French service purchasing managers index (PMI) dropped to a seasonally adjusted 45.2 in December, as compared to its earlier estimate of 46.0, this indicates that a major slowdown is now seen in its economy. In addition, the Euro also found support with the US Non-Farm Payroll after it added 155,000 jobs in December which is better-than-expected in its projection of 150,000.Moreover, the ECB and BoE meetings will be the main focus for this week, in which both central banks are expected to hold their policies unchanged. The economic policies by both central banks might help boost the Euro for this week. In Italy, with the coming general election in February, most investors are now focusing on whether the elections will help ease its economy.The center-left

led by Pier Luigi Berasani is now leading a three-way race with center-left coalition led by Democratic Party and former Prime Minister Berlusconi’s People of Freedom Party. In the meantime, Prime Minister Monti who resigned last December after it has just approved its 2013 budget and his bloc is at fourth with support of around 15% according to latest polls.Meanwhile, the Euro-zone’s Sentix Investor Confidence showed an improvement in its investor’s confidence in December due to the commitment given by the European Central Bank to safeguard the Euro which helps ease and stabilize confidence among investors.

Commentary

For the coming session, expect the Euro to find more favorable leads in its trading for today despite the temporary optimism shown by the fiscal cliff negotiation in the US last week. In addition, the Euro finds support in its positive economic data, in which its service sector in which it’s purchasing managers index (PMI) posted a rise of 47.8 in December as compared to its 46.7 in its previous month, while its composite output index climbed to 47.2 in December, from its reading of 46.5 in November.In addition, the consumer price index (CPI) remained unchanged at a seasonally adjusted annual rate of 2.2% in December, from 2.2% in the preceding month. Meanwhile, Germany’s purchasing managers index (PMI) for the services sector climbed to 52.0 in December which is slightly lower than 52.1 estimated earlier, and compared to 49.7 in November. In addition, retail sales also shown a rise of 1.2% on a seasonally-and –calendar adjusted basis in November, as compared to a 1.3% drop in the previous month.

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